Walgreens Surges 27% as Cost-Cutting Measures and Strong Q1 Performance Signal Turnaround

In a remarkable turnaround for the pharmacy retail giant, Walgreens Boots Alliance shares skyrocketed 27% following the announcement of better-than-expected first-quarter earnings for fiscal 2025. The company, which had been the worst-performing stock in the S&P 500 last year with a 60% decline, demonstrated significant progress in its strategic restructuring efforts.

The drugstore chain reported impressive first-quarter sales of $39.46 billion, marking a 7.5% increase compared to the same period last year. This performance substantially exceeded analyst expectations, driven by growth across all three of its business divisions. Despite posting a net loss of $265 million, or 31 cents per share, the company’s adjusted earnings of 51 cents per share surpassed Wall Street forecasts.

Under the leadership of CEO Tim Wentworth, Walgreens is implementing an aggressive cost-cutting strategy, including plans to close 1,200 underperforming stores over the next three years. The company has specifically targeted 500 store closures for fiscal 2025, demonstrating its commitment to optimizing its retail footprint. Currently operating approximately 8,500 retail pharmacies in the United States, this restructuring represents a significant shift in the company’s operational strategy.

The U.S. retail pharmacy division, Walgreens’ largest segment, contributed $30.87 billion in sales, representing a 6.6% increase. Pharmacy sales showed particular strength, rising 10.4% with comparable pharmacy sales up 12.7%, driven by branded medication price inflation. However, retail sales faced challenges, declining 6.2% due to a weaker cough, cold, and flu season and reduced discretionary spending.

The company’s healthcare division demonstrated robust growth, with sales reaching $217 billion, a 12% increase from the previous year. This growth was partially attributed to advancements in primary-care provider VillageMD and specialty pharmacy Shields Health Solutions. The international segment also performed well, with sales of $6.43 billion, exceeding analyst projections.

Maintaining its fiscal 2025 adjusted earnings guidance of $1.40 to $1.80 per share, Walgreens has shown early signs of stabilization. The company’s focus on strategic priorities, including optimizing store footprint, managing operating expenses, enhancing cash flow, and addressing reimbursement structures, appears to be gaining traction.

The market’s positive response to Walgreens’ earnings report comes amid speculation about potential acquisition talks with private equity firm Sycamore Partners. This development adds another layer of interest to the company’s ongoing transformation efforts and future prospects.